Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
Steve Geary is adjunct faculty at the University of Tennessee's Haaslam College of Business and is a lecturer at The Gordon Institute at Tufts University. He is the President of the Supply Chain Visions family of companies, consultancies that work across the government sector. Steve is a contributing editor at DC Velocity, and editor-at-large for CSCMP's Supply Chain Quarterly.
To get an idea of the complexity of Alan Estevez's job, you only have to look at the length of his title. Estevez is the principal deputy assistant secretary of defense (logistics & materiel readiness) in the office of the secretary of defense and has served as the acting assistant secretary of defense (logistics & materiel readiness) since April 2009. What that means is that Estevez is the most senior official in the Department of Defense (DOD) devoted to supply chain, distribution, transportation, product support, and logistics issues.
While that may tell you something about what Estevez does, it doesn't begin to convey the scale of the operation he oversees. But the following comparison might provide some perspective: If DOD logistics were a private-sector business, Estevez would be the CEO of a company with close to $200 billion in annual revenue. That would place it in the top 10 of the Fortune 500.
Estevez is a civil servant who has spent his entire career in military logistics, beginning in 1981 at the Bayonne Military Ocean Terminal. He received a Bachelor of Arts degree in political science from Rutgers University in 1979 and a master's degree in national security resource strategy from the Industrial College of the Armed Forces in 1995.
Estevez spoke recently with DC VELOCITY Group Editorial Director Mitch Mac Donald and Editor-at-Large Steve Geary about the challenges the Department of Defense currently faces.
Q: Can you help our readers understand the scale of DOD logistics?
A: Last year, fiscal year 2009, we probably spent about $190 billion in logistics support for the Department of Defense. That included moving equipment, people, and supplies—everything from a bottle of water to a repair part for an Apache helicopter or an MRAP [mine-resistant ambush-protected vehicle] or the MRAP itself.
Q: Is there a large government logistics support infrastructure? A: We operate 19 [government] maintenance facilities throughout the United States, where we fix equipment when it comes back from the fight. The logistics support infrastructure also encompasses 25 Defense Logistics Agency supply depots around the world, including one in Kuwait that is completely focused on sustainment for Iraq and Afghanistan.
Q: What else is included in that $190 billion? A: That number includes the money we spend with our partners in the commercial sector who also fix that equipment, and it includes repair parts. We manage over 5 million line items—part numbers or different SKUs, in commercial parlance—and of course millions and millions of parts underneath those stock numbers. We are also buying everything from gloves and uniforms to food and petroleum. A good chunk of those dollars are spent in direct support of Afghanistan and Iraq.
Q: How big a role do commercial carriers play in the DOD supply chain? A: About 50 percent of what we move in the air goes on the tail of a plane that says "U.S. Air Force" on the back, a C-17 or a C-5, and about 50 percent goes on commercial aircraft. We try to find the right airplane for the right mission at the right time. All of the carriers will have a commitment to provide us with those planes in a time of need.
Q: Is it the same for sealift? A: With sealift, probably 80 to 85 percent of what we move goes commercial. All sustainment cargo goes commercial, so it is going into a 20-foot or 40-foot container. It may be coming from the United States or it could be coming out of stocks in Germany, Japan, or Korea.
We have a great relationship with the American sealift and American-flag carriers. The U.S. Transportation Command does a great job of building relationships with those carriers, and I spend a lot of time doing that myself. We also have capability to access capacity on those vessels in times of need. We have to have a great relationship with the industry to get that capability provided.
We also are using roll-on roll-off carriers to move military equipment.
Q: Is there a military sealift capability? A: We have an internal organic [government-owned] sealift capacity of our own, the Military Sealift Command, which we maintain in a state of readiness. That means in a time of emergency, for example, on day one, I could load out a brigade combat team from Fort Hood through the Port of Beaumont [Texas].
Q: Who actually operates the DOD supply chain? A: Our multiple commands and military services are executing. The U.S. Transportation Command and the Defense Logistics Agency are the primary two joint executors. Then each combatant commander manages logistics underneath it, and then the military services actually execute the logistic structure for their forces, so it is a massive, massive process.
Q: How does the drawdown in Iraq compare with its counterpart in the first Gulf War? A: If you do it as a comparison with Desert Storm, there was more stuff to bring home from Desert Storm. We had 550,000 troops on the ground in March 1991, when Desert Storm ended. We do not have that size of force on the ground in Iraq today—our maximum during the surge was 160,000.
Q: But we've heard that the drawdown in Iraq, combined with the surge in Afghanistan, makes for the largest military movement since World War II? A: Dr. Ash Carter, the undersecretary for acquisitions, logistics, and technology, remarked in a recent speech that Desert Storm was like checking into a hotel room and checking out. Iraq is like living in a house for seven or eight years and then leaving. We have built up a great deal of infrastructure there, including 350 forward operating bases of varying sizes that we were running [at the peak of the surge]—the largest of which are the size of cities.
Q: How is the drawdown in Iraq going? A: Obviously, Iraq is still constituting its government following the recent elections, so we have what we call a waterfall, a gradual drawdown and then a steeper drawdown until the August time frame. By our metrics, we are ahead of our schedule. We have gotten more equipment, more people, and more containers out of the country than our metrics said we had to get out in order to meet the August time frame. So overall, given all the complexities, we are doing extremely well in pulling out of Iraq.
Q: At the same time that you're overseeing the drawdown in Iraq, you're building up in Afghanistan. How does Afghanistan compare with Iraq? A: It is an incredible challenge. Iraq has roads, paved roads. It has electricity. Afghanistan has been completely war torn for 40 years, and it shows. When the wars in Afghanistan started in 1973, Afghanistan was a Third World nation at the lowest end of the Third World nations. Infrastructure in Afghanistan is almost non-existent.
Q: What do you mean by non-existent? A: Well, let's talk about roads. There are just a few major arteries around the country. The rest are dirt roads, if you want to call them roads. They are more like yak paths.
Q: So how does that compare with what you've seen in Iraq? A: I flew in a helicopter for about an hour and a half from one base in Afghanistan to another. During that time, I probably saw five cars moving down one of the main roads, and I saw no cars out in front of farmhouses and houses along that route. Now if you go to the Al Anbar province in Iraq, you're going to see plenty of vehicles.
Q: OK, we understand that logistics are challenging in Afghanistan, but we understand that getting there is a significant challenge as well. A: When moving to Afghanistan, you are either moving through what used to be the Soviet Union to the north, or the routes through Pakistan. Of course, Pakistan has its own troubles, so those routes are at risk even before you cross into Afghanistan. To the west is Iran, and that isn't an option, for obvious reasons.
Q: Is there anything that didn't come up in the conversation that you'd like to share with our readers? A: We need to talk about contractors on the battlefield. We talked about the supply, the industrial base that sustains our forces, but to support those large bases in the field, we do have a large contractor workforce deployed. A good portion of those people engage in what we would call logistics support in sustaining the base or in repairing equipment that's on the battlefield, or they might be managing some of our supplies for us out there in the battlefield.
That is one of the new realities—we used contractors back in the Revolutionary War, but it is more prevalent today. We could not do this without the great support we have from the contractor community, our partners, and transportation providers through some third-party logistics service providers.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."